Inflation Reduction Act - Clean Vehicle & Solar

The inflation reduction act has many provisions, but we would like to address two key provisions below:

Clean Vehicle Credit

Manufacturing Component

The Clean Vehicle Credit can be up to $7,500 per eligible vehicle, provided that the vehicle satisfies the critical materials and battery component criteria. These criteria stipulate that a specific percentage of critical components and battery minerals must be manufactured, processed, extracted, or produced in the United States or in nations that have a free trade agreement with the United States.

Adjusted Gross Income and MSRP Limits

Starting from January 1, 2023, taxpayers will not qualify for the Clean Vehicle Credit if their modified AGI exceeds the specified amounts. Taxpayers may use Modified Adjusted Gross Income from the year they take delivery of the vehicle or the year before, whichever is less. This eligibility restriction applies to vehicles that are put into service after December 31, 2022.

• • • Married Filing Joint: $300,000
    • Head of Household: $225,000
    • All other taxpayers: $150,000

Also applicable to vehicles placed in service after December 31, 2022, the credit cannot be claimed for vehicles whose manufacturer’s suggested retail price (MSRP) exceeds:

• • • $80,000 for vans, pick-up trucks, or SUVs; and
    • $55,000 for all other vehicles.

Solar Credit - A Return to 30% Credit

The Residential Energy Efficient Property (REEP) Credit has been granted an extension of 11 years and is now called the "Residential Clean Energy Credit," applicable to property put into service before January 1, 2035. This updated credit can be claimed for qualified fuel cell property, small wind energy property, geothermal heat pump property, biomass stove and water heater property, as well as solar energy property.

Moreover, the newly added qualified battery storage technology expenditures can now also be included in the list of qualified expenditures eligible for the credit, for expenses made after December 31, 2022.

For 2022, the solar credit was restored for the entire year, but this relief is not retroactive to 2021 or earlier years.